MSC Industrial Direct Co. Inc.

10/22/2026 | Press release | Distributed by Public on 10/22/2026 12:36

Annual Report for Fiscal Year Ending August 29, 2026 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
MSC is a leading North American distributor of a broad range of metalworking, MRO and production fastener and hardware products and services. We help our customers drive greater productivity, profitability and growth with approximately 2.5 million products, inventory management and other supply chain solutions, and deep expertise from more than 80 years of working with customers across industries. We continue to implement our strategies to gain market share, generate new customers, increase sales to existing customers, and diversify our customer base.
Our experienced team of more than 7,000 associates works with our customers to help drive results for their businesses, from keeping operations running efficiently today to continuously rethinking, retooling and optimizing for a more productive tomorrow. We offer approximately 2.5 million active, saleable SKUs through our catalogs; our brochures; our E-commerce channels, including the MSC website; our inventory management solutions; and our customer care centers, customer fulfillment centers, regional inventory centers and warehouses. We service our customers from five customer fulfillment centers, eight regional inventory centers, 37 warehouses and five manufacturing locations. Many of our products are carried in stock, and orders for these in-stock products are typically fulfilled the day on which the order is received.
Our business model centers on delivering value-added services that address complex procurement challenges for our customers, with a focus on reducing total procurement costs and enabling just-in-time delivery through integrated solutions. We focus on offering inventory, process and procurement solutions that reduce supply chain costs and improve plant floor productivity for our customers. We support our customers' growth and profitability by ensuring operational efficiency through technologies such as our VMI, CMI and vending programs.
Our Strategy
Our strategy is to position ourselves as a mission-critical partner to our customers. We focus on our existing growth drivers including our market-leading metalworking business and providing customers highly technical and high-touch solutions to solve their most complex challenges on the plant floor. We have experienced success to date as measured by the growth rates of our high-touch programs, such as vending and in-plant programs. To supplement our metalworking and MRO business, we have expanded our Class C Consumables and original equipment manufacturer ("OEM") product offerings through strategic acquisitions to further enhance value to our customers and enable cross-selling across our broad product portfolio.
We intend to complement our foundational strengths with investments in capabilities that support future growth. In fiscal year 2026, we invested in our dedicated customer experience organization, expanded our marketing programs, rolled out several E-commerce enhancements and completed our sales optimization initiative. These investments target continued expansion of our solutions offerings, engagement with the core customer, productivity improvements and our goal of reducing operating expenses as a percentage of net sales.
Highlights
Highlights during fiscal year 2026 include the following:
•We generated $306.5 million of cash from operations compared to $333.7 million in fiscal year 2025.
•We had net payments of $5.0 million on our credit facilities and private placement debt compared to net payments of $21.5 million in fiscal year 2025.
•We repurchased $14.0 million of Class A Common Stock compared to $39.3 million in fiscal year 2025, excluding excise taxes in both years.
•We paid out an aggregate of $194.3 million in regular cash dividends, compared to an aggregate of $189.7 million in regular cash dividends in fiscal year 2025.
•We incurred $8.7 million in restructuring and other costs compared to $11.0 million in fiscal year 2025, consisting primarily of current year severance and separation costs as well as consulting-related costs in the current and prior fiscal year.
•We recognized asset impairments and other charges, primarily related to the Company's digital core implementation, of $43.7 million. See Note 8, "Asset Impairments and Related Charges" in the Notes to Consolidated Financial Statements for additional information.
•We amended our Receivables Purchase Agreement (the "RPA") which increased the amount available under the facility by $50.0 million. Proceeds from the amended RPA were utilized to pay down existing debt on our credit facilities.
•We acquired the remaining noncontrolling interest of Wm. F. Hurst Co. LLC, and of both MSC Industrial Supply, S. de R.L. de C.V. and MSC Import Export LLC, which, as of the respective acquisition dates, eliminated the consolidated noncontrolling interest balance and the allocation of future earnings to noncontrolling shareholders. See Note 6, "Acquisitions" in the Notes to Consolidated Financial Statements for additional information.
Our vending machines in service totaled 31,078 as of August 29, 2026, compared to 29,611 as of August 30, 2025, and our in-plant programs totaled 431 locations as of August 29, 2026, compared to 411 as of August 30, 2025. Our sales force, which focuses on a more complex and high-touch role, drives value for our customers by enabling them to achieve higher levels of growth, profitability and productivity. Our field sales and service associate headcount was 2,515 at August 29, 2026 compared to 2,636 at August 30, 2025. The reduction in field sales and service associate headcount was attributable to headcount reduction actions taken during the first two quarters of fiscal year 2026 related to the Company's sales optimization efforts and refreshed go-to-market strategy. See Note 15, "Restructuring and Other Costs" in the Notes to Consolidated Financial Statements for additional information.
The chart below displays a comparison of our net sales from fiscal year 2025 through fiscal year 2026:
1 Fiscal year 2026 had 253 sales days and fiscal year 2025 had 252 sales days.
2 Pricing and other is comprised of changes in customer and product mix, discounting and other items.
3 Individual amounts may not agree to the annual total due to rounding.
Business Environment
The United States economy has experienced various macroeconomic pressures in recent years including pricing pressure from tariffs and inflation, sustained high interest rates, increased fuel costs and general economic and political
uncertainty. The impact from tariffs, which was most significant in the latter half of the Company's fiscal year 2025, has continued through fiscal year 2026. Furthermore, as a supplier to the United States federal government, the federal government shutdown during the Company's fiscal first quarter and the partial federal government shutdowns during the Company's fiscal second quarter negatively impacted sales to our public sector end-market. Additionally, increased fuel costs resulting from the conflict within Iran and geopolitical tensions in the region have increased macroeconomic uncertainty generally and may lead to higher freight expense and cost pressure on the products offered by the Company. These pressures have impacted, and may continue to impact in the future, the Company's business, financial condition and results of operations.
International Emergency Economic Powers Act ("IEEPA") Tariff Refunds
On February 20, 2026, the United States Supreme Court issued a ruling invalidating certain tariffs originally mandated under IEEPA. As a result, the United States Court of International Trade ordered the United States Customs and Border Patrol to process refunds for tariffs collected under IEEPA. As a distributor, we are not the importer of record for most products we sell. However, during the fiscal year ended August 29, 2026, we formally submitted refund claims and received cash refunds for certain tariffs which had previously been paid by the Company as the importer of record and are now disallowed under the United States Supreme Court ruling. As of August 29, 2026, cash refunds received were not material. Refunds attributable to inventory previously sold have been recognized within Cost of goods sold on the Consolidated Statement of Income, while refunds attributable to inventory remaining on hand have been reflected in Inventories on the Consolidated Balance Sheet and will be recognized through Cost of goods sold as the related inventory is sold. The ultimate availability, timing and amount of potential refunds remains uncertain and subject to regulatory, legal and administrative developments. As of August 29, 2026, we have not recorded an additional receivable related to such tariff refunds due to the aforementioned uncertainty; however, we may recognize additional benefits in future periods.
Following the Supreme Court's ruling on IEEPA tariffs, the United States Executive Branch introduced new tariffs under a different statutory authority. There remains significant uncertainty regarding the scope and duration of current and potential tariffs. The Company continues to monitor and evaluate these developments and assess their potential impact on the Company's business, financial condition and results of operations.
We utilize various indices when evaluating the level of our business activity, including the Industrial Production ("IP") Index. Approximately 67% of our revenues came from sales in the manufacturing sector during the quarter and year ended August 29, 2026. Through statistical analysis, we have found that trends in our customers' activity have correlated to changes in the IP Index. The IP Index measures short-term changes in industrial production. Growth in the IP Index from month to month indicates growth in the manufacturing, mining and utilities industries. After giving effect to the annual technical revisions to calculations of the IP Index which occurred in November 2025, the IP Index over the three months ended August 29, 2026 and the average for the three- and 12-month periods ended August 29, 2026 were as follows:
Period IP Index
June 102.8
July 103.0
August 103.1
Fiscal Year 2026 Q4 Average 103.0
12-Month Average 102.0
The average IP Index for the 12 months ended August 29, 2026 of 102.0 increased from the average from the prior fiscal year of 100.7. The IP Index for the fourth fiscal quarter of 2026 of 103.0 increased compared to the prior year period of 101.7 and increased slightly compared to the prior quarter of 102.3.
During fiscal year 2026, the Company experienced a more constructive demand environment compared to much of fiscal year 2025. The heavy manufacturing industry, which represented 58% of our revenues during the year ended August 29, 2026, showed signs of expansion. Several IP subindexes, including Aerospace, Machinery and Equipment, Primary Metals and Fabricated Metals improved. Non-manufacturing demand, in particular the Company's public sector end-market, recovered from lower sales resulting from the federal government shutdowns earlier in fiscal year 2026.
We will monitor the current economic conditions for the impact on our customers and markets and assess both risks and opportunities that may affect our business and operations.
Results of Operations
Fiscal Year Ended August 29, 2026 Compared to the Fiscal Year Ended August 30, 2025
The table below summarizes the Company's results of operations both in dollars (in thousands) and as a percentage of net sales for the periods indicated:
Fiscal Years Ended
August 29, 2026
(52 weeks) 		August 30, 2025
(52 weeks) 		Change
$ % $ % $ %
Net sales $ 4,009,703 100.0 % $ 3,769,521 100.0 % $ 240,182 6.4 %
Cost of goods sold 2,370,450 59.1 % 2,233,386 59.2 % 137,064 6.1 %
Gross profit 1,639,253 40.9 % 1,536,135 40.8 % 103,118 6.7 %
Operating expenses 1,266,344 31.6 % 1,223,573 32.5 % 42,771 3.5 %
Restructuring and other costs 8,679 0.2 % 10,999 0.3 % (2,320) (21.1) %
Asset impairment and related charges 43,664 1.1 % - - % 43,664 N/A
Income from operations 320,566 8.0 % 301,563 8.0 % 19,003 6.3 %
Total other expense (28,521) (0.7) % (37,985) (1.0) % 9,464 (24.9) %
Income before provision for income taxes 292,045 7.3 % 263,578 7.0 % 28,467 10.8 %
Provision for income taxes 72,135 1.8 % 65,742 1.7 % 6,393 9.7 %
Net income 219,910 5.5 % 197,836 5.2 % 22,074 11.2 %
Less: Net loss attributable to noncontrolling interest (2,679) (0.1) % (1,492) 0.0 % (1,187) 79.6 %
Net income attributable to MSC Industrial $ 222,589 5.6 % $ 199,328 5.3 % $ 23,261 11.7 %
Net Sales
Net sales in fiscal year 2026 increased 6.4%, or $240.2 million, from the prior fiscal year. The $240.2 million increase in net sales was comprised of a positive impact from pricing of $236.3 million and favorable foreign exchange impact of $5.7 million, partially offset by $1.8 million of lower sales volume. The positive pricing impact was inclusive of changes in customer and product mix, discounting, favorable pricing actions and other items. Of the $240.2 million increase in net sales during fiscal year 2026, sales to our core and other customers increased by $165.4 million, sales to our national account customers increased by $72.3 million, and sales to our public sector customers increased by $2.5 million.
The tables below show, among other things, the annual 2026 average daily sales ("ADS") by total company, by customer end-market and by customer type compared to the same periods in the prior fiscal year:
ADS Percentage Change by Quarter
(Unaudited)
2026 Fiscal Period Thirteen-Week Period Ended Fiscal Q1 Thirteen-Week Period Ended Fiscal Q2 Thirteen-Week Period Ended Fiscal Q3 Thirteen-Week Period Ended Fiscal Q4 Fiscal Year Ended August 29, 2026
Net Sales (in thousands) $ 965,684 $ 917,774 $ 1,047,083 $ 1,079,162 $ 4,009,703
Sales Days 62 63 64 64 253
ADS (1) (in millions)
$ 15.6 $ 14.6 $ 16.4 $ 16.9 $ 15.8
Total Company ADS Percent Change (2)
4.0 % 2.9 % 7.8 % 8.6 % 6.0 %
ADS Percentage Change by End-Market and Customer Type
Fiscal Year Ended August 29, 2026
Manufacturing Customers ADS Percent Change (2)
5.5 %
Manufacturing Customers Percent of Total Net Sales 67 %
Non-Manufacturing Customers ADS Percent Change (2)
6.8 %
Non-Manufacturing Customers Percent of Total Net Sales 33 %
National Account Customers ADS Percent Change (2)
4.8 %
National Account Customers Percent of Total Net Sales 36 %
Public Sector Customers ADS Percent Change (2)
0.3 %
Public Sector Customers Percent of Total Net Sales 9 %
Core and Other Customers ADS Percent Change (2)
7.7 %
Core and Other Customers Percent of Total Net Sales 55 %
(1)ADS is calculated using the number of business days in the United States for the periods indicated. The Company believes ADS is a key performance indicator because it shows the effectiveness of the Company's selling performance on a consistent basis between periods.
(2)Percent reflects the change from the 2025 fiscal period to the 2026 fiscal period.
We believe that our ability to transact business with our customers through various electronic portals and directly through the MSC website gives us a competitive advantage over smaller suppliers. Sales made through our E-commerce platforms, including sales made through electronic data interchange systems, VMI systems, Extensible Markup Language ordering-based systems, vending, hosted systems and other electronic portals, represented 63.7% of consolidated net sales for fiscal year 2026, compared to 63.8% of consolidated net sales for fiscal year 2025.
Gross Profit
Gross profit increased 6.7% to $1,639.3 million in fiscal year 2026, as compared to $1,536.1 million in fiscal year 2025. Gross profit margin was 40.9% in fiscal year 2026, compared to 40.8% in fiscal year 2025. The increase in gross profit was primarily a result of higher net sales, as described above, while the increase in gross profit margin was primarily a result of favorable pricing actions.
Operating Expenses
Operating expenses increased 3.5% to $1,266.3 million in fiscal year 2026, as compared to $1,223.6 million in fiscal year 2025. Operating expenses were 31.6% of fiscal year 2026 net sales, as compared to 32.5% for fiscal year 2025. The increase in operating expenses was primarily attributable to higher depreciation and amortization expense, advertising expense and stock-based compensation expense. The decrease in operating expenses as a percentage of net sales was primarily due to growth in net sales outpacing the increase in operating expenses.
Payroll and payroll-related costs were approximately 54.8% of total operating expenses in fiscal year 2026, as compared to 57.0% in fiscal year 2025. Payroll and payroll-related costs, which include salary, incentive compensation, sales commission, and fringe benefit costs, decreased by $3.9 million for fiscal year 2026. Headcount reduction actions during fiscal year 2026 resulted in lower salary and sales commission costs, which were partially offset by our annual merit increase, higher incentive compensation accrual and fringe benefit costs.
Freight expense was $147.2 million for fiscal year 2026, as compared to $150.5 million for fiscal year 2025. The primary driver of the decrease was favorable third-party shipping rates achieved through our network optimization initiatives and higher freight costs in the prior year incurred while servicing certain customers in the public sector.
Depreciation and amortization was $99.5 million for fiscal year 2026, as compared to $88.4 million for fiscal year 2025. The increase was primarily driven by capital expenditures to support our strategic growth initiatives and expanded solutions footprint.
Advertising expense was $53.5 million for fiscal year 2026, as compared to $46.7 million for fiscal year 2025. The primary driver of the increase was higher search engine marketing spend and paid media investments as part of the Company's enhanced marketing efforts which began midway through fiscal year 2025.
Restructuring and Other Costs
We incurred $8.7 million in restructuring and other costs for fiscal year 2026, as compared to $11.0 million for the prior fiscal year. The decrease was primarily due to the decrease in consulting-related costs compared to the prior fiscal year. See Note 15, "Restructuring and Other Costs" in the Notes to Consolidated Financial Statements for additional information.
Asset Impairment and Related Charges
We incurred $43.7 million in asset impairments and related charges for fiscal year 2026, which were primarily attributable to the Company's digital core implementation. See Note 8, "Asset Impairments and Related Charges" in the Notes to Consolidated Financial Statements for additional information.
Income from Operations
Income from operations increased 6.3% to $320.6 million in fiscal year 2026, as compared to $301.6 million in fiscal year 2025. Income from operations as a percentage of net sales remained comparable at 8.0% in both fiscal years 2026 and 2025. The increase in income from operations was primarily attributable to an increase in net sales, partially offset by higher operating expenses and asset impairments, as described above.
Total Other Expense
Total other expense decreased 24.9%, or $9.5 million, to $28.5 million for fiscal year 2026, as compared to $38.0 million for the prior fiscal year. The decrease was primarily due to the recognition of $5.1 million of employee retention credit ("ERC") funds, lower interest costs on our credit facilities and current year remeasurement gains from foreign exchange.
Provision for Income Taxes
Our effective tax rate for fiscal year 2026 was 24.7%, as compared to 24.9% for fiscal year 2025. See Note 9, "Income Taxes" in the Notes to Consolidated Financial Statements for further information.
Net Income
The factors which affected net income for fiscal year 2026, as compared to the prior fiscal year, have been discussed above.
Liquidity and Capital Resources
August 29,
2026 		August 30,
2025 		$ Change
(In thousands)
Total debt $ 476,947 $ 485,699 $ (8,752)
Less: Cash and cash equivalents 65,028 56,228 8,800
Net debt $ 411,919 $ 429,471 $ (17,552)
Equity $ 1,425,707 $ 1,396,502 $ 29,205
As of August 29, 2026, we had $65.0 million in cash and cash equivalents, substantially all with well-known financial institutions. Historically, our primary financing needs have been to fund our working capital requirements necessitated by our sales growth and the costs of acquisitions, new products, new facilities, facility expansions, investments in vending solutions, technology investments, and productivity investments. Cash generated from operations, together with borrowings under our credit facilities and net proceeds from the private placement notes, have been used to fund these needs, to repurchase shares of Class A Common Stock from time to time, and to pay dividends to our shareholders.
As of August 29, 2026, total borrowings outstanding, representing amounts due under our credit facilities and notes, as well as all finance leases and financing arrangements, were $476.9 million, net of unamortized debt issuance costs of $1.3 million, as compared to total borrowings outstanding of $485.7 million, net of unamortized debt issuance costs of $1.5 million, as of August 30, 2025. See Note 11, "Debt" in the Notes to Consolidated Financial Statements for more information about these balances.
We believe, based on our current business plan, that our existing cash, financial resources and cash flow from operations will be sufficient to fund anticipated capital expenditures, debt maturities and operating cash requirements for at least the next 12 months. We will continue to evaluate our financial position in light of future developments and to take appropriate action as it is warranted.
The table below summarizes information regarding the Company's cash flows for the periods indicated:
Fiscal Years Ended
August 29,
2026 		August 30,
2025
(In thousands)
Net cash provided by operating activities $ 306,500 $ 333,717
Net cash used in investing activities (80,527) (63,294)
Net cash used in financing activities (217,083) (243,572)
Effect of foreign exchange rate changes on cash and cash equivalents (90) (211)
Net increase in cash and cash equivalents $ 8,800 $ 26,640
Operating Activities
Net cash provided by operating activities for fiscal year 2026 and fiscal year 2025 was $306.5 million and $333.7 million, respectively. The decrease was primarily due to the following:
•an increase in inventories in the current fiscal year compared to relatively flat inventories in the prior year due to inventory management countermeasures in response to tariffs and to support sales growth;
•an increase in accounts receivable in the current fiscal year compared to relatively flat accounts receivable in the prior year attributable to increased sales levels, which was partially offset by the RPA amendment;
•a decrease in the change in accounts payable and accrued liabilities as compared to the prior year period primarily due to lower accounts payable and payroll and payroll-related accruals; partially offset by
•an increase in non-cash transactions in the current fiscal year, including $43.7 million of impairment and related charges, higher stock-based compensation and higher depreciation and amortization; and
•an increase in net income, as described above
The table below summarizes certain information regarding the Company's operations:
Fiscal Years Ended
August 29,
2026 		August 30,
2025
(Dollars in thousands)
Working Capital (1)
$ 579,127 $ 497,208
Current Ratio (2)
1.8 1.7
Days' Sales Outstanding (3)
37.1 37.8
Inventory Turnover (4)
3.5 3.4
(1)Working Capital is calculated as current assets less current liabilities.
(2)Current Ratio is calculated by dividing total current assets by total current liabilities.
(3)Days' Sales Outstanding is calculated by dividing accounts receivable by net sales, using trailing two months sales data.
(4)Inventory Turnover is calculated by dividing total cost of goods sold by inventory, using a 13-month trailing average inventory.
Working capital and current ratio increased compared to August 30, 2025, primarily due to higher balances of inventories and accounts receivable.
Days' sales outstanding as of August 29, 2026 declined compared to August 30, 2025. The improvement in days' sales outstanding was driven by the RPA amendment in the second quarter of fiscal year 2026.
Inventory turnover as of August 29, 2026 increased compared to August 30, 2025. Inventory turnover continues to improve due to category management efforts and supply chain efficiencies to optimize inventory levels. The recent increase in inventories is due to inventory management countermeasures in response to tariffs and to support recent sales growth.
Investing Activities
Net cash used in investing activities for fiscal year 2026 and fiscal year 2025 was $80.5 million and $63.3 million, respectively. The use of cash for both fiscal years was primarily due to expenditures for property, plant and equipment mainly related to expanding our solutions footprint and other infrastructure and technology investments. The use of cash in fiscal year 2025 was partially offset by proceeds from the sale of the Columbus CFC.
Financing Activities
Net cash used in financing activities for fiscal year 2026 and fiscal year 2025 was $217.1 million and $243.6 million, respectively, primarily due to the following:
•$194.3 million of regular cash dividends paid during fiscal year 2026 compared to $189.7 million of regular cash dividends paid during fiscal year 2025;
•$14.0 million in aggregate repurchases of Class A Common Stock during fiscal year 2026 compared to $39.3 million in aggregate repurchases of Class A Common Stock during fiscal year 2025;
•net payments under our credit facilities and private placement debt of $5.0 million during fiscal year 2026 compared to net payments of $21.5 million during fiscal year 2025; and
•acquisition of the remaining interest of Wm. F. Hurst Co., LLC for $8.2 million which increased the Company's ownership from 80% to 100%.
Debt
Credit Facilities
In April 2017, the Company entered into a $600.0 million revolving credit facility, which was subsequently amended and extended in August 2021, May 2023 and July 2025 (as amended, the "Amended Revolving Credit Facility"). Subsequent to the end of fiscal year 2026, the Company made additional net payments of $25.0 million through October 1, 2026 on the Amended Revolving Credit Facility. The unused balance of $555.5 million from the Amended Revolving Credit Facility, which is reduced by outstanding letters of credit, is available for working capital purposes if necessary. As of August 29, 2026, the Company also had three uncommitted credit facilities, totaling $230.0 million of aggregate maximum uncommitted availability. As of August 29, 2026, we were in compliance with the operating and financial covenants of our credit facilities. See Note 11, "Debt" in the Notes to Consolidated Financial Statements for more information about our credit facilities.
Private Placement Debt
The Company has issued several series of unsecured senior notes in private placement transactions. As of August 29, 2026, the total amount of outstanding private placement notes was $200.0 million. See Note 11, "Debt" in the Notes to Consolidated Financial Statements for more information about these transactions.
Leases and Financing Arrangements
As of August 29, 2026, certain of our operations were conducted on leased premises. These leases are for varying periods, with the longest extending to fiscal year 2032. In addition, we are obligated under certain equipment and automobile operating and finance leases, which expire on varying dates through fiscal year 2030.
From time to time, we enter into financing arrangements with vendors to purchase certain IT equipment or software.
Capital Expenditures
We continue to invest in E-commerce and vending platforms, customer fulfillment centers and distribution networks and other infrastructure and technology.
Future Liquidity Outlook
As of August 29, 2026, our future contractual obligations were as follows (in thousands):
Contractual Obligations Fiscal Year 2027 Thereafter
Undiscounted operating lease obligations (1)
$ 25,761 $ 29,272
Undiscounted finance lease obligations, net of interest (2)
195 331
Maturities of long-term debt obligations, net of interest (3)
100,000 160,000
Estimated interest on long-term debt (4)
12,431 24,802
Total contractual obligations $ 138,387 $ 214,405
(1)Certain of our operations are conducted on leased premises. These leases are for varying periods, with the longest extending to fiscal year 2032. In addition, we are obligated under certain equipment and automobile operating leases, which expire on varying dates through fiscal year 2028. See Note 12, "Leases" in the Notes to Consolidated Financial Statements for additional information on our operating lease arrangements.
(2)As of August 29, 2026, the Company had entered into various finance leases for certain IT equipment, which expire on varying dates through fiscal year 2030. See Note 12, "Leases" in the Notes to Consolidated Financial Statements for additional information on our finance lease arrangements.
(3)Excludes debt issuance costs.
(4)Interest payments for long-term debt are based on principal amounts and coupons or contractual rates at fiscal year-end.
As of August 29, 2026, the Company had recorded a non-current liability of $1.6 million for tax uncertainties and interest. This amount is excluded from the table above, as the Company cannot make reliable estimates of these cash flows by period. See Note 9, "Income Taxes" in the Notes to Consolidated Financial Statements.
We have not entered into any off-balance sheet arrangements and there are no commitments or obligations (including, but not limited to, guarantees; retained or contingent interests in assets transferred; contractual arrangements
that support the credit, liquidity or market risk for transferred assets; or risk related to derivatives or other financial products related to our equity securities), including contingent obligations, with unconsolidated entities or persons that had, during the periods presented herein, or are reasonably likely to have a material impact on the Consolidated Financial Statements.
Critical Accounting Estimates
We make estimates, judgments and assumptions in determining the amounts reported in the Consolidated Financial Statements and accompanying Notes. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The estimates are used to form the basis for making judgments about the carrying values of assets and liabilities and the amount of revenues and expenses reported that are not readily apparent from other sources. Actual results may differ from these estimates. Our significant accounting policies are described in the Notes to Consolidated Financial Statements. The accounting policies described below are impacted by our critical accounting estimates. More information on the critical accounting estimates can be found in Note 1, "Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.
Allowance for Credit Losses
We perform periodic credit evaluations of our customers' financial condition, and collateral is generally not required. The Company considers several factors to estimate the allowance for credit losses in accounts receivable, including the age of the receivables and the historical ratio of actual write-offs to the age of the receivables, and also reflects the adopted accounting standard related to current expected credit losses. See Note 1, "Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements for more information.
Inventories
Inventory is reflected at the lower of cost or net realizable value considering such factors as its age, the physical condition of the inventory, historic sales, historical write-down activity as well as known trends as compared to on-hand inventory. The Company will write down inventories for slow-moving or obsolete considerations.
Goodwill and Other Indefinite-Lived Intangible Assets
The purchase price of an acquired company is allocated between the intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. The determination of the value of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted-average cost of capital. The Company annually reviews goodwill at the reporting unit level and intangible assets that have indefinite lives for impairment in its fiscal fourth quarter and when events or changes in circumstances indicate the carrying values of these assets might exceed their current fair values.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. The tax balances and income tax expense recognized by the Company are based on management's interpretations of the tax laws of multiple jurisdictions. Income tax expense reflects the Company's best estimates and assumptions regarding, among other items, the level of future taxable income, interpretations of tax laws and uncertain tax positions.
Other
Other significant accounting policies, not involving the same level of measurement uncertainties as those discussed above, are nevertheless important to an understanding of the financial statements. Policies such as revenue recognition, depreciation, intangibles, long-lived assets and warranties require judgments on complex matters that are often subject to multiple external sources of authoritative guidance such as the Financial Accounting Standards Board and the SEC. Possible changes in estimates or assumptions associated with these policies are not expected to have a material effect on the financial condition or results of operations of the Company. More information on these additional accounting
policies can be found in Note 1, "Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
Refer to Note 1, "Business and Summary of Significant Accounting Policies" in the Notes to Consolidated Financial Statements.
MSC Industrial Direct Co. Inc. published this content on October 22, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 22, 2026 at 18:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]